inovativna organizacija-struktura, ucenje i adaptacija, alice lam

7/27/2019 Inovativna Organizacija-Struktura, Ucenje i Adaptacija, Alice Lam

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Innovative Organizations: Structure, Learning andAdaptation

Alice Lam

Paper presented at the DIME Final Conference, 6-8 April 2011, Maastricht.


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Philip Beesley,

Hylozoic Ground, Canadian Pavilion, 2010 Venice Biennale for Architecture


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1. InTRoDUCTIon

Innovation is an important source ofgrowth and a key determinant of competitiveadvantage for many organizations. Achieving

innovation requires the coordinated effortsof many different actors and the integrationof activities across specialist functions,knowledge domains and contexts ofapplication. Thus, organizational creationis fundamental to the process of innovation(Van de Ven et al 1999). The ability of anorganization to innovate is a pre-condition

for the successful utilization of inventiveresources and new technologies. Conversely,the introduction of new technology oftenpresents complex opportunities andchallenges for organizations, leading tochanges in managerial practices and theemergence of new organizational forms.Organizational and technological innovationsare intertwined. Schumpeter (1950) saworganizational changes, alongside newproducts and processes, as well as newmarkets as factors of creative destruction.

Extant literature on organizationalinnovation is very diverse and can be broadlyclassied into three streams. Organizational

design theories focus predominantly on

the link between structural forms and thepropensity of an organization to innovate(e.g. Burns and Stalker, 1961; Lawrenceand Lorsch, 1967; Mintzberg, 1979). The

unit of analysis is the organization andthe main research aim is to identify thestructural characteristics of an innovativeorganization, or to determine the effectsof organizational structural variables onproduct and process innovation. Theories oforganizational cognition and learning (Glynn,1996; Bartel and Garud, 2009), by contrast,

emphasise the cognitive foundations oforganizational innovation which is seen torelate to the learning and organizationalknowledge creation process (Agyris andSchon, 1978; Nonaka and Takeuchi, 1995;Nonaka and von Krogh, 2009). This strand ofwork provides a micro-lens for understandingthe capacity of organizations to createand exploit new knowledge necessaryfor innovative activities. A third strand ofresearch concerns organizational changeand adaptation, and the processes underlyingthe creation of new organizational forms(Lewin and Volberda, 1999). Its main focusis to understand whether organizations can

adapt in the face of radical environmental

Alice LamSchool of Management RoyalHolloway University of London

Lam, A. (2010) 'Innovative organizations: structure,learning and adaptation', Innovation Perspectives for the21st Century, Madrid: BBVA, Spain, pp.163-175.


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shifts and technological change. In thiscontext, innovation is considered as acapacity to respond to changes in the externalenvironment, and to inuence and shape it

(Burgleman, 1991; 2002; Child, 1997; Teece,2007).

This chapter examines the nature ofinnovative organizations and the relationshipbetween organizing and innovating fromthese three perspectives. Section two willdraw on organizational design theories andwork in the eld of strategy to examine therelationship between organizational structureand innovativeness. The third section looksat the micro-level process of organizationallearning and knowledge creation. It arguesthat organizations with different structuralforms vary in their patterns of learning andknowledge creation, engendering different

types of innovative capabilities. This will befollowed by an analysis of organizationaladaptation and the contemporary challengesfacing rms in pursuing organizationalambidexterity for sustaining innovation. Thenal section draws some general conclusionsfrom the analysis and highlights the gaps inthe existing literature and areas for future

research.

2. oRGanIzaTIonaL STRUCTURE anD InnovaTIon

2.1. Structural archetypes and innovativeness

The classical theory of organizationaldesign was marked by a preoccupationwith universal forms and the idea of onebest way to organise. The work of Weber(1947) on the bureaucracy and of Chandler(1962) on the multidivisional form, was mostinuential. The assumption of one bestway was, however, challenged by researchcarried out during the 1960s and 1970sunder the rubric of contingency theorywhich explains the diversity of organizational

forms and their variations with reference

to the demands of context. Contingencytheory argues that the most appropriatestructure for an organization is the onethat best ts a given operating contingency,

such as scale of operation (Blau, 1970),technology (Woodward, 1965; Perrow, 1970)or environment (Burns and Stalker, 1961;Lawrence and Lorsch, 1967). This strandof research and theory underpins ourunderstanding of the relationships betweenthe nature of the task and technologicalenvironments, structure and performance.Some of the studies deal specically withthe question of how structure is related toinnovation.

Burns and Stalkers (1961) polartypologies of mechanistic and organicorganizations (see Box 1) demonstratehow the differences in technological and

market environment, in terms of their rate ofchange and complexity, affect organizationalstructures and innovation management.Their study found that rms could be groupedinto one of the two main types: the formermore rigid and hierarchical, suited to stableconditions; and the latter, a more uid setof arrangements, adapting to conditions

of rapid change and innovation. Neithertype is inherently right or wrong, but therms environment is the contingency thatprompts a structural response. Related isthe work of Lawrence and Lorsch (1967) onprinciples of organizational differentiationand integration and how they adapt todifferent environmental conditions, includingthe market -- technical-economic and thescientic sub-environments, of differentindustries. Whereas Burns and Stalkertreat an organization as an undifferentiatedwhole that is either mechanistic or organic,Lawrence and Lorsch recognize thatmechanistic and organic structures can

co-exist in different parts of the same


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organization owing to the different demandsof the functional sub-environments. Thework of these earlier authors had a profoundimpact on organizational theory and provided

useful design guidelines for innovationmanagement. Burns and Stalkers modelremains highly relevant for our understandingof the contemporary challenges facing manyorganizations in their attempts to moveaway from the mechanistic towards theorganic form of organizing, as innovationbecomes more important and the pace ofenvironmental change accelerates. Lawrenceand Lorschs suggestion that mechanisticand organic structures can coexist isreected in the contemporary debateabout the importance of developing hybridmodes of organizationsambidextrous

organizationsthat are capable of copingwith both evolutionary and revolutionarytechnological changes (OReilly and Tushman,2004; 2008; Tushman et al., 2010; see

section 4).Another important early contribution is

the work of Mintzberg (1979) who synthesisedmuch of the work on organizational structureand proposed a series of archetypes thatprovide the basic structural congurationsof rms operating in different environments.In line with contingency theory, he arguesthat the successful organization designs itsstructure to match its situation. Moreover,it develops a logical conguration of thedesign parameters. In other words, effectivestructuring requires consistency of designparameters and contingency factors. The

Source: Burns and Stalker

(1961).

Tble 1. Burns and Stalker: Mechanistic and Organic Structures

Burns and Stalker set out to explore whether differences in the technological and market environments affect the structureand management processes in rms. They investigated twenty manufacturing rms in depth, and classied environmentsinto stable and predictable and unstable and unpredictable. They found that rms could be grouped into one of the twomain types, mechanistic and organic forms, with management practices and structures that Burns and Stalker consideredto be logical responses to environmental conditions.The Mechanistic Organization has a more rigid structure and is typically found where the environment is stable and

predictable. Its characteristics are:a. tasks required by the organization are broken down into specialised, functionally differentiated duties and individual tasksare pursued in an abstract way, that is more or less distinct from the organization as a whole;b. the precise denition of rights, obligations and technical methods is attached to roles, and these are translated into theresponsibilities of a functional position; there is also a hierarchical structure of control, authority and communication;c. knowledge of the whole organization is located exclusively at the top of the hierarchy, with greater importance andprestige being attached to internal and local knowledge, experience and skill rather than that which is general to the wholeorganization;d. there is a tendency for interactions between members of the organization to be vertical, i.e. between superior andsubordinate.The Organic Organization has a much more uid set of arrangements and is an appropriate form for changing environmentalconditions which require emergent and innovative responses. Its characteristics are:a. individuals contribute to the common task of the organization and there is continual adjustment and re-denition ofindividual tasks through interaction with others;b. there is spread of commitment to the organization beyond any technical denition, a network structure of control authorityand communication, and the direction of communication is lateral rather than vertical;c. knowledge may be located anywhere in the network, with this ad hoc location becoming the centre of authority andcommunication;d. importance and prestige attach to afliations and expertise valid in industrial, technical and commercial milieus externalto the rm.Mechanistic and organic forms are polar types at the opposite ends of a continuum and, in some organizations, a mixture ofboth types can be found.


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congurational hypothesis suggests thatrms are likely to be dominated by one of theve pure archetypes identied by Mintzberg,each with different innovative potential:

simple structure, machine bureaucracy,professional bureaucracy, divisionalised formand adhocracy. Two of these archetypes canbe classied as organic organizations with ahigh capacity for innovation and adaptation:the simple structure and the adhocracy. Theformer relies on direct supervision by oneperson, as in the case of entrepreneurialstart-ups, which continuously searcheshigh-risk environments. The latter is a highlyexible project-based organization relying onthe mutual adjustment of problem-solvingteams. It is capable of radical innovationin a volatile environment. The other threeremaining archetypes, machine bureaucracy,

professional bureaucracy and thedivisionalized form are more inhibited in theirinnovative capabilities and less able to copewith novelty and change. The characteristicfeatures of the archetypes and their innovativeimplications are shown in Table 1.

Contingency theories account for thediversity of organizational forms in different

technological and task environments.They assume that as technology andproduct markets become more complexand uncertain, and task activities moreheterogeneous and unpredictable,organizations will adopt more adaptiveand exible structures, and they will doso by moving away from bureaucratic toorganic forms of organizing. The underlyingdifculties in achieving the match, however,are not addressed in this strand of research.

2.2. Strategy, structure and the innovative rm

The work of micro-economists in theeld of strategy considers organizational

structure as both cause and effect of

managerial strategic choice in response tomarket opportunities. Organizational formsare constructed from the two variablesof strategy and structure. The central

argument is that certain organizational typesor attributes are more likely to yield superiorinnovative performance in a given environmentbecause they are more suited to reducetransaction costs and cope with potentialcapital market failures. The multi-divisional,or M-form, for example, has emerged inresponse to increasing scale and complexity ofenterprises and is associated with a strategyof diversication into related product andtechnological areas (Chandler, 1962). It can bean efcient innovator within certain specicproduct markets, but may be limited in itsability to develop new competencies.

Lazonicks theory of the innovative

enterprise (Lazonick, 2005; 2010) isrooted in the Chandlerian framework,inasmuch as it focuses on how strategyand structure determine the competitiveadvantage of the business enterprise. Italso builds on Lawrence and Lorschs (1967)conceptualisation of organizational designproblems as differentiation and integration.

The theory distinguishes the optimizingrm from the innovative rm. While theformer seeks to maximize prots withingiven technological capabilities and marketconstraints, the latter seeks to transformtechnological and markets constraintsthrough the development of distinctiveorganizational capabilities which cannot beeasily imitated by competitors. Lazonickidenties three social conditions that supportthe development of the innovative rm. Therst condition is strategic control whichrefers to the set of relations that gives keydecision-makers the power, knowledge andincentives to allocate the rms resources to

confront market threats and opportunities.


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The second condition is organizationalintegration -- that is the horizontal andvertical integration of skills and knowledge tosupport cumulative learning over time. Andthe third condition is nancial commitmentto ensure that sufcient funds are allocatedfor competence development to sustain thecumulative innovation process. The essenceof the innovative enterprise, according toLazonick (2005: 34), is the organizationalintegration of a skill base that can engagein collective and cumulative learning. Thecritical importance of skills and knowledge

integration as the social foundations of

innovation is also stressed by several otherauthors (Lam, 2000; Lam and Lundvall, 2006).

Because the conditions that underpinthe innovative rm are social, the type oforganisational integrative capability and thenature of the innovative rm tend to varyacross institutional contexts and over time(Whitley, 2000; Lazonick, 2005). Drawing oncomparative historical evidence, Lazonick(2005) has illustrated the rise and fall ofdifferent national models of innovativerms characterised by different types oforganizational capabilities. For example,

the growth of the US industrial corporation

Sources: Mintzberg (1979); Tiddet al. (1997: 313-314); Lam(2000).

Tble 2. Mintzbergs structural archetypes and their innovative potentials

orgiti rchetype Key fetures Itie ptetil

Simple structure An organic type centrally controlled byone person, which can respond quickly to

changes in the environment, e.g. small start-ups in high-technology.

Entrepreneurial and often highlyinnovative, continually searching for high-

risk environments. Weaknesses are thevulnerability to individual misjudgement andresource limits on growth.

Machine bureaucracy A mechanistic organization characterized bya high level of specialization, standardizationand centralized control. A continuous effortto routinize tasks through formalization ofworker skills and experiences, e.g. massproduction rms.

Designed for efciency and stability. Goodat dealing with routine problems, but highlyrigid and unable to cope with novelty andchange.

Professional bureaucracy A decentralised mechanistic form which

accords a high degree of autonomy toindividual professionals. Characterized byindividual and functional specialization, witha concentration of power and status in theauthorized experts. Universities, hospitals,law and accounting rms are typicalexamples.

The individual experts may be highly

innovative within a specialist domain, but thedifculties of coordination across functionsand disciplines impose severe limits on theinnovative capability of the organization as awhole.

Divis ionalized form A decentralized organic form in whichquasi-autonomous entities are looselycoupled together by a central administrativestructure. Typically associated with larger

organizations designed to meet localenvironmental challenges.

An ability to concentrate on developingcompetency in specic niches. Weaknessesinclude the centrifugal pull away fromcentral R&D towards local efforts, and

competition between divisions which inhibitknowledge sharing.

Adhocracy A highly exible project-based organizationdesigned to deal with instability andcomplexity. Problem-solving teams can berapidly recongured in response to externalchanges and market demands. Typicalexamples are professional partnerships andsoftware engineering rms.

Capable of fast learning and unlearning;highly adaptive and innovative. However, theunstable structure is prone to short life, andmay be driven over time toward bureaucracy(see also section 3.2).


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during the rst half of the twentieth centurywas energised by a powerful managerialorganization for deploying new technologyand using unskilled and semi-skilled

workers in mass production. The USmanagerial corporation was confronted bythe Japanese model of the innovative rmin the 1970s which outperformed the US inmany industrial sectors such as consumerelectronics, machine tools and automobiles.Japanese rms have been able to gain acompetitive advantage in these industriesbecause of their superior organizationalcapacity for integrating shop-oor skillsand enterprise networks, enabling them toplan and coordinate specialised divisions oflabour and innovative investment strategies.The late 1990s saw the resurgence of theUS high-technology sectors spearheaded

by what Lazonick (2005; 2010) refers to asnew economy companies in Silicon Valleywhich drew their innovative capabilities fromthe dynamic integration of technical andentrepreneurial skills within highly exible,open network organizations.

The theory of the innovative rmpropounded by Lazonick, alongside other

researchers in the eld of strategy (e.g.Teece et al., 1997; Teece, 2007) stressesthe importance of organizational andmanagerial processesintegrating, learningand recongurationas core elements thatunderpin rms innovative performance.However, this strand of work devotes littleattention to the micro-dynamics of learningwithin organizations.

3. THE CoGnITIvE FoUnDaTIonS oF

oRGanIzaTIonaL InnovaTIon

3.1. Organizational learning and knowledge

creation

The structural perspectives discussed

above treat innovation as an output of certain

structural features. Some organizationalresearchers regard innovation as a processof bringing new, problem-solving, ideas intouse (Amabile, 1988; Kanter, 1983). Mexias

and Glynn (1993: 78) dene innovation asnon-routine, signicant, and discontinuousorganizational change that embodies a newidea that is not consistent with the currentconcept of the organizations business. Thisapproach denes an innovative organizationas one that is intelligent and creative (Glynn,1996; Woodman et al., 1993), capable oflearning effectively (Argote, 1999; Senge,1990; Agyris and Schon, 1978) and creatingnew knowledge (Nonaka, 1994; Nonakaand Takeuchi, 1995; Nonaka and vonKrogh, 2009). Cohen and Levinthal (1990)argue that innovative outputs depend onthe prior accumulation of knowledge that

enables innovators to assimilate and exploitnew knowledge. From this perspective,understanding the role of organizationallearning in fostering or inhibiting innovationbecomes crucially important.

Central to theories of organizationallearning and knowledge creation is thequestion of how organizations translate

individual insights and knowledge intocollective knowledge and organizationalcapability. While some researchers arguethat learning is essentially an individualactivity (Simon, 1991; Grant, 1996), mosttheories of organizational learning stressthe importance of collective knowledge as asource of organizational capability. Collectiveknowledge is the accumulated knowledgeof the organization stored in its rules,procedures, routines and shared normswhich guide the problem-solving activitiesand patterns of interaction among itsmembers. Collective knowledge resemblesthe memory or collective mind of the

organization (Walsh and Ungson, 1991). It


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can either be a stock of knowledge stored ashard data, or represent knowledge in a stateof ow emerging from interaction. Collectiveknowledge exists between rather than within

individuals. It can be more, or less, than thesum of the individuals knowledge, dependingon the mechanisms that translate individualinto collective knowledge (Glynn, 1996). Bothindividuals and organizations are learningentities. All learning activities, however, takeplace in a social context, and it is the natureand boundaries of the context that make adifference to learning outcomes.

Much of the literature on organizationallearning points to the importance of socialinteraction, context and shared cognitiveschemes for learning and knowledgecreation (Agyris and Schon, 1978; Lave andWenger, 1991; Brown and Duguid, 1991,

1998; Bartel and Garud, 2009). This buildson Polanyis (1966) idea that a large part ofhuman knowledge is subjective and tacit,and cannot be easily codied and transmittedindependently of the knowing subject. Henceits transfer requires social interaction and thedevelopment of shared understanding andcommon interpretive schemes.

Nonakas theory of organizationalknowledge creation is rooted in the ideathat shared cognition and collective learningconstitute the foundation of organizationalknowledge creation (Nonaka, 1994; Nonakaand Takeuchi, 1995; Nonaka and von Krogh,2009). At the heart of the theory is the ideathat tacit knowing constitutes the origin ofall human knowledge, and organizationalknowledge creation is a process of mobilisingindividual tacit knowledge and fostering itsinteraction with the explicit knowledge baseof the rm. Nonaka argues that knowledgeneeds a context to be created. He uses theJapanese word ba, which literally means

place, to describe such a context. Ba

provides a shared social and mental space forthe interpretation of information, interactionand emerging relationships that servesas a foundation for knowledge creation.

Participating in a bameans transcendingones limited cognitive perspective or socialboundary to engage in a dynamic process ofknowledge sharing and creation. In a similarvein, the notion of community of practice(Lave and Wenger, 1991; Wenger, 1998;Brown and Duguid, 1991; 1998) suggeststhat organizational members construct theirshared identities and perspectives throughpractice, that is shared work experiences.Practice provides a social activity in whichshared perspectives and cognitive repertoiresdevelop to facilitate knowledge sharing andtransfer. Hence, the work group providesan important site where intense learning

and knowledge creation may develop.The group, placed at the intersection ofhorizontal and vertical ows of knowledgewithin the organization, serves as a bridgebetween the individual and organization inthe knowledge creation process. Much of therecent literature on new and innovative formsof organization also focuses on the use of

decentralised, group-based structure as akey organizing principle.

Many organizational and managementresearchers regard the rm as a criticalsocial context where collective learning andknowledge creation take place. Nonaka andTakeuchi (1995) talk about the knowledge-creating company. Argyris and Schon(1978) suggest that an organization is, atits root, a cognitive enterprise that learnsand develops knowledge. Organizationalknowledge essentially refers to the sharedcognitive schemes and distributed commonunderstanding within the rm that facilitateknowledge sharing and transfer. It is similar

to Nelson and Winters (1982) concept of


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organizational routines: a kind of collectiveknowledge rooted in shared norms andbeliefs that aids joint-problem solving andis capable of supporting complex patterns

of action in the absence of written rules.The notion of core competence (Prahaladand Hamel, 1990) implies that the learningand knowledge creation activities of rmstend to be cumulative and path-dependent.Firms tend to persist in what they do becauselearning and knowledge are embedded insocial relationships, shared cognition and

existing ways of doing things (Kogut andZander, 1992). Several authors have analysedhow collective learning in technology dependson rms cumulative competences andevolves along specic trajectories (Dosi, 1988;Pavitt, 1991). Thus, the shared context andsocial identity associated with strong group-

level learning and knowledge accumulationprocesses may constrain the evolution ofcollective knowledge. Firms may nd itdifcult to unlearn past practices and explorealternative ways of doing things. Levinthaland March (1993) argue that organizationsoften suffer from learning myopia, and havea tendency to sustain their current focus and

accentuate their distinctive competence: whatthey call falling into a competency trap.The empirical research by Leonardo-Barton(1992) illustrates how rms core capabilitiescan turn into core rigidities in new productdevelopment.

An inherent difculty in organizationallearning is the need to maintain an externalboundary and identity while at the same timekeeping the boundary sufciently open toallow the ow of new knowledge and ideasfrom outside. March (1991) points out thata fundamental tension in organizationallearning is balancing the competing goalsof the exploitation of old certainties and

the exploration of new possibilities.

Whereas knowledge creation is often aproduct of an organizations capabilityto recombine existing knowledge andgenerate new applications from its existing

knowledge base, radically new learningtends to arise from contacts with thoseoutside the organization who are in a betterposition to challenge existing perspectivesand paradigms. Empirical research hassuggested that sources of innovation oftenlie outside an organization (von Hippel, 1988;Lundvall, 1992). External business alliances

and network relationships, as well as usingnew personnel to graft new knowledge ontothe existing learning systems, are importantmechanisms for organizational learningand knowledge renewal in an environmentcharacterised by rapid technologicaldevelopment and disruptive changes (Powell,

1998; Lam, 2007). The dynamic capabilityperspective argues that the long-termcompetitive performance of the rm lies inits ability to build and develop rm-speciccapability and, simultaneously, to renew andre-congure its competences in responseto an environment marked by creativedestruction (Teece et al., 1997; Teece

2007). Thus, a fundamental organizationalchallenge in innovation is not simply themaintenance of a static balance betweenexploitation and exploration, or stability andchange, but a continuous need to balance andcoordinate the two dynamically throughoutthe organization.

3.2. Two alternative models of learning

organizations: J-form vs. Adhocracy

All organizations can learn and createknowledge, but their learning patterns andinnovative capabilities vary (Lam, 2000; 2002).During the past two decades, an extensiveliterature has examined new organizational

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organizational learning and innovation. Thesemodels include high performance worksystems or lean production (Womack etal., 1990), pioneered by Japanese rms in

the automobile industry; and the N-formcorporation (Hedlund, 1994) and hypertextorganization (Nonaka and Takeuchi 1995).More recently, concepts such as cellularforms (Miles et al., 1997); modular forms(Galunic and Eisenhardt, 2001); project-based networks (DeFillippi, 2002) and neweconomy rms (Lazonick, 2005) reect

the growth of exible and adaptive formsof organization with a strategic focus onentrepreneurship and radical innovation inknowledge-intensive sectors of the economy.These studies highlight the different waysin which rms seek to create learningorganizations capable of continuous problem

solving and innovation.A closer examination of the literature onnew forms suggests that the various modelsof learning organizations can be broadlyclassied into two polar ideal types, namely,the J-form and adhocracy (Lam, 2000;2002). The former refers to an organizationwhich is good at exploitative learning and

derives its innovative capabilities fromthe development of organization-speciccollective competences and problem-solvingroutines. The term J-form is used becauseits archetypal features are best illustratedby the Japanese type of organizations, suchas Aokis (1988) model of the J-rm, andNonaka and Takeuchis (1995) knowledgecreating companies. Adhocracy (Mintzberg,1979), by contrast, tends to rely more uponindividual specialist expertise organized inexible market-based project teams capableof speedy responses to changes in knowledgeand skills, and integrating new kinds ofexpertise to generate radical new products

and processes. It is skilled at explorative

learning. Mintzbergs term is used here tocapture the dynamic, entrepreneurial andadaptive character of the kind of organizationtypied by Silicon- Valley-type companies

(Bahrami and Evans, 2000). Both the J-formand adhocracy are learning organizationswith strong innovative capabilities, butthey differ markedly in their knowledgecongurations, patterns of learning and thetype of innovative competences generated.These two polar organizational typesare facilitated by different institutional

characteristics of labour markets andsystems of competence building (Lam, 2000;Lam and Lundvall, 2006).

The J-form organization relies onknowledge that is embedded in its operatingroutines, team relationships and sharedculture. It is facilitated by a relatively stable,

long-term employment relationship and,a broad-based education and trainingsystem for the majority of the workforce.Learning- and knowledge-creation within theJ-form takes place within an organizationalcommunity that incorporates shopoorskills in problem solving, and intensiveinteraction and knowledge sharing across

different functional units. The existenceof stable organizational careers rootedin an internal labour market provide anincentive for organizational members tocommit to organizational goals and todevelop rm-specic problem-solvingknowledge for continuous product andprocess improvement. New knowledge isgenerated through the fusion, synthesisand combination of the existing knowledgebase. The J-form tends to develop a strongorientation towards pursuing an incrementalinnovation strategy and do well in relativelymature technological elds characterisedby rich possibilities of combinations and

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components and products (e.g. machine-based industries, electronics componentsand automobiles). But the J-forms focus onnurturing organizationally-embedded, tacit

knowledge and its emphasis on continuousimprovement in such knowledge caninhibit learning radically new knowledgefrom external sources. The disappointingperformance of Japanese rms in suchelds as software and biotechnology inthe 1990s may constitute evidence of thedifculties faced by J-form rms in entering

and innovating in rapidly developing newtechnological elds (Whitely, 2003).

An adhocracy is an organic and adaptiveform of organization that is able to fuseprofessional experts with varied skills andknowledge into adhoc project teams forsolving complex and often highly uncertain

problems. Learning and knowledge creationin an adhocracy occurs within professionalteams that often are composed of employeesfrom different organizations. Careers areusually structured around a series of discreteprojects rather than advancing within an intra-rm hierarchy. The resulting project-basedcareer system is rooted in a relatively uid

occupational labour market which permitsthe rapid reconguration of human resourcesto align with shifting market requirementsand technological changes. The adhocracyhas a much more permeable organizationalboundary that allows the insertion of newideas and knowledge from outside. Thisoccurs through the recruitment of newstaff, and the open professional networksof the organizational members that spanorganizational boundaries. The adhocracyderives its competitive strength from its abilityto recongure the knowledge base rapidly todeal with high levels of technical uncertainty,and to create new knowledge to produce novel

innovations in emerging new industries. It is

a very adaptive form of organization capableof dynamic learning and radical innovation.However, the uid structure and speed ofchange may create problems in knowledge

accumulation, since the organizationscompetence is embodied in its membersprofessional expertise and market-basedknow-how which are potentially transferable.The adhocracy is subject to knowledge losswhen individuals leave the organization. Thelong-term survival of this loose, permeableorganizational form requires the support of a

stable social infrastructure rooted in a wideroccupational community or localised rmnetworks

Although rms in the high-technologysectors are under intense pressure tolearn faster and organize more exibly,evidence thus far suggests that complete

adhocracies remain rare. Adhocracies areusually conned to organizational subunitsengaged in creative work (e.g. skunk workadhocracies) (Quinn, 1992), or knowledge-intensive professional service elds (e.g.law, management consultancies, softwareengineering design) where the size of therm is generally relatively small, enabling

the whole organization to function as aninterdependent network of project teams(DeFillippi, 2002). Attempts by largecorporations to adopt the adhocracy modehave proved difcult to sustain in the long-run(Foss, 2003). Elsewhere, the most successfulexamples of adhocracies are found inregionally based industrial communities, asin the case of Silicon Valley, and other high-technology clusters (Saxenian, 1996; Angels,2000). There, the agglomeration of rmscreates a stable social context and sharedcognitive framework to sustain collectivelearning and reduce uncertainty associatedwith swift formation of project teams and

organizational change.


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4. oRGanIzaTIonaL CHanGE anD aDaPTaTIon:

ToWaRDS oRGanIzaTIonaL aMBIDExTERITY

Can organizations change and survivein the face of major environmental shifts?

If so, how do they adapt? There are twobroad perspectives in the research onorganizational change. Organizationalecology and institutional theorists(Hannan and Freeman, 1984; Barnett andCaroll, 1995; DiMaggio and Powell, 1983;Greenwood and Hinings, 1996) emphasizethe powerful forces of organizational inertia

and argue that individual organizationsseldom succeed in making radical changein strategy and structure in the face ofenvironmental turbulence. This strand ofresearch focuses on the way environmentsselect organizations, and how this selectionprocess creates change in organizational

forms as new entrants within an industrydisplay the established organizations thatcannot adapt fast enough. One possibleway for organizations to adapt, accordingto the selectionist perspective, is to spinout new business ventures (Barnett andFreeman, 2001; Christensen, 1997). Bycontrast, theories of strategic organizational

adaptation and change focus on the role ofmanagerial action and strategic choice inshaping organizational change (Child, 1997;Burgleman, 2002; Teece, 2007). They vieworganizational change as a product of anactors decisions and learning, rather thanthe outcome of a passive environmentalselection process. According to Child (1997),

organizational action is bounded by thecognitive, material and relational structuresinternal and external to the organization,but at the same time it impacts upon thosestructures. Organizational actors, throughtheir actions and enactment (Weick, 1979),are capable of redening and modifying

structures in ways that will open up new

possibilities for future action. As such, thestrategic choice perspective projects thepossibility of creativity and innovative changewithin the organization.

Many strategic adaptation theoristsview organizational change as a continuousprocess encompassing the paradoxicalforces of continuity and change.Continuity maintains a sense of identityfor organizational learning (Weick, 1996),provides political legitimacy, and increasesthe acceptability of change among those

who have to live with it (Child and Smith,1987). Burglemans (1991, 2002) study of Intelcorporation illustrates how the companysuccessfully evolved from a memory to amicroprocessor company by combining thetwin elements of continuity and change forstrategic renewal. Burgleman argues that

consistently successful organizations use acombination of induced and autonomousprocesses in strategy-making to bring aboutorganizational renewal. The induced processdevelops initiatives that are within the scopeof the organizations current strategy andbuild on existing organizational learning(i.e. continuity). In contrast, the autonomous

process concerns initiatives that emergeoutside the organization and provide theopportunities for new organizational learning(i.e. change). These twin processes areconsidered vital for successful organizationaltransformation. In a similar vein, Brownand Eisenhardt (1997) note that continuousorganizational change for rapid product

innovation is becoming a crucial capabilityfor rms operating in high-velocity industrieswith short product cycles. Based on casestudies of multi-product innovations in thecomputer industry, the authors conclude thatcontinuous change and product innovationsare supported by organizational structures

that can be described as semi-structures,


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a combination of mechanistic and organicfeatures, that balance order and chaos.

The dual search for stability and changeconstitutes a central paradox in all forms

of organizing and poses a major challengefor rms operating in todays businessenvironment (Farjoun, 2010). In the past,many organizational theorists maintainedthat the structures, processes and practicesthat support stability and reliability werelargely incompatible with those neededfor change and exibility. The tension

between exploitation and exploration inorganizational learning and innovation is afamiliar example (March, 1991). Exploitationbuilds on existing knowledge and thriveson the kind of organizational cohesivenessfound in the J-form whereas explorationrequires the creation of new knowledge and

novel ideas nurtured in an entrepreneurialmode of organizing such as the adhocracy(Lam, 2000). The contrasting organizinglogics underlying the two activities maketheir effective combination extremelydifcult, if not impossible. However, inrecent years there have been growingpressures on organizations to develop dual

structures and processes for sustainingperformance in a fast changing andcomplex environment. The notion of anambidextrous organization (OReilly andTushman, 2004, 2008; Tushman et al., 2010)suggests that the key to the long-termsuccess of rms lies in their ability to exploitexisting competences while simultaneously

exploring new possibilities to compete inboth mature and emerging markets. Theterm ambidexterity means doing both.According to OReilly and Tushman (2004;2008), ambidextrous organizations areones that can sustain their competitiveadvantage by operating in multiple modes

simultaneouslymanaging for short-term

efciency by emphasizing stability andcontrol, and for long-term innovation bytaking risks. Organizations that operatein this way develop multiple, internally

inconsistent architectures, competencesand cultures, with built-in capabilities forefciency, consistency and reliability neededfor exploiting current business on the onehand, and experimentation and improvisationfor exploring new opportunities on the other.From a strategic perspective, organizationalambidexterity is seen as a dynamic capability

enabling organizations to maintainecological tness and, when necessary,to recongure existing assets and developthe new skills needed to address emergingthreats and opportunities (OReilly andTushman, 2008: 189).

The concept of organizational

ambidexterity is an attractive one. However,the conditions under which it leads to long-term success and its impact on innovativeperformance have yet to be veried. Thechallenge associated with managing theapparent paradox of stability and changeremains a formidable task for manyorganizations.

5. ConCLUSIon

Innovation is a process of learning, andlearning is a collective process that occurswithin an organized setting. This chapterhas examined the nature and developmentof innovative organizations from threedifferent but interdependent perspectives:

1. the relationship between organizationalstructural forms and innovativeness;2. innovation as a process of organizationallearning and knowledge creation; and3. organizational capacity for change andadaptation. The analysis suggests thatbuilding innovative organizations entails

not only matching structural forms with


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technological and market opportunities, butalso embedding the capacity for learning andknowledge creation within team processesand social relationships. There are different

types of learning and innovative organizationsand their dominant features tend to varyover time and across institutional contexts.However, a fundamental characteristic ofinnovation is that it always consists of a newcombination of ideas, knowledge, capabilitiesand resources. Thus, maintaining theopenness of an organization for absorbing

new knowledge and ideas from a varietyof sources increases the scope for newcombinations and enhances the possibilityfor producing more sophisticated innovations.An enduring challenge facing all innovativeorganizations is the encapsulation of dualstructures, processes and capabilities that

reconcile stability and exploitation withchange and exploration to ensure currentviability and long-term adaptability. Thenotion of an ambidextrous organizationhas become a popular expression to denotethe paradox of managing innovation in thecontemporary business environment.

Organizational innovation is a multifaceted

phenomenon. The extensive literaturein organization studies has advancedour understanding of the effects oforganizational structure on the ability oforganizations to learn, create knowledgeand generate technological innovation. Weknow relatively less, however, about howinternal organizational dynamics and actor

learning interact with technological andenvironmental forces to shape organizationalevolution. It remains unclear how and underwhat conditions organizations shift fromone structural archetype to another, and therole of technological innovation in drivingthe process of organizational change is also

obscure. The bulk of the existing research

has tended to focus on how technology andmarket forces shape organizational outcomesand treat organizations primarily as a vehicleor facilitator of innovation, rather than

focussing on the process of organizationalinnovation itself. For example, we tendto assume that technological innovationtriggers organizational change becauseit shifts the competitive environment andforces organizations to adapt to the newset of demands. This deterministic viewneglects the possibility that differences

in organizational interpretations of, andresponses to, external stimuli can affectthe outcomes of organizational change.Treating the organization as an interpretationand learning system (e.g. Daft and Weick,1994; Greve and Taylor, 2000) directs ourattention to the important role of internal

organizational dynamics, actor cognitionand behaviour in shaping the externalenvironment and outcomes of organizationalchange. A promising direction for futureresearch would be to take greater accountof endogenous organizational forces such ascapacity for learning, values, interests andculture in shaping organizational change and

innovation.


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